One of the revenue measures announced in the 2014-15 federal Budget was an increase in the fuel excise.

The morning after the budget, Prime Minister Tony Abbott told ABC Radio's AM program the change won't make a major dent in family finances. "The fuel excise indexation will cost the average family 40 cents a week in year one," he said.

Mr Abbott made a similar claim on ABC TV's Insiders. "I accept that the fuel excise indexation will cost in the first year the average family 40 cents a week," he said.

ABC Fact Check assesses the Prime Minister's claim about the impact of the fuel excise.

Abbott fuel claim verdict

The claim: Tony Abbott says the reintroduction of fuel excise indexation will cost the average family 40 cents a week in the first year.

The verdict: Mr Abbott's 40-cent claim applies to "the average household" rather than "the average family". For some families, such as a couple with dependent children, that figure can be 55 cents extra per week. Mr Abbott is close to the mark.

History of fuel taxes

The first duty on imported petrol was imposed by the Australian government in 1901, and the first excise on domestic petrol to raise revenue for road building was levied in 1929.

A similar excise on diesel for road users was introduced in 1957 with exemptions for off-road users, and in 1982 the Diesel Fuel Rebate Scheme for off-road users replaced the exemptions.

An excise has been imposed on other fuels and motor oils, but Liquefied Petroleum Gas (LPG) and ethanol were made duty free in 1979 and 1980 respectively, to encourage their use.

In 1983, six-monthly indexation of the fuel excise was introduced in line with changes in the cost of living as measured by the consumer price index (CPI) to maintain the real value of the excise.

That indexation was abolished in 2001 to alleviate the impact of high petrol prices.

Changes to the fuel excise

The recent Federal Budget announced that biannual indexation of the fuel excise to the Consumer Price Index would recommence on August 1, 2014. The CPI is currently increasing at a rate of 2.9 per cent annually.

It's estimated that in 2014-15, indexation will add about one cent per litre to the current rate of the fuel excise of 38.143 cents per litre.

The move is expected to gather net revenue (after accounting for fuel tax credits for business use) of $179.3 million in 2014-15. Net revenue is then forecast to increase to $400 million in 2015-16, $720 million in 2016-17, and $1.05 billion in 2017-18.

The Government has pledged to amend the Excise Act of 1901 to ensure more money is spent on road infrastructure than the net revenue from the reintroduction of indexation.

Calculating the cost

A Household Energy Consumption Survey, conducted by the Australian Bureau of Statistics in 2012 and released in September 2013, found that on average Australian households spent $59 a week on fuel, comprised of $51 on petrol and $8 on diesel.

Combining these two figures produces an average weekly usage for all households of 35.3 litres of petrol and 5.3 litres of diesel, a total of 40.7 litres of taxed fuel.

With indexation expected to add one cent per litre to the excise, that means the change would cost 40.7 cents per week.

The Prime Minister's office confirmed to Fact Check that their calculations were based on the average all-household measure.

However, that does not reflect the spending of "the average family" referred to by Mr Abbott in his interviews. The average household includes people living alone, in group households and in multiple-family households.

The ABS survey does not include weekly spending for the "average family". It does contain results for seven types of households. As the table shows, lone-person households spent less than half the all-household figure.

Household type

Weekly spending on petrol ($)

Weekly spending on diesel ($)

Total weekly spending ($)

Additional weekly cost after fuel excise indexation (cents)

Couple with dependent children

69

11

80

55.1

Single-parent family with dependent children

44

3

47

32.5

Couple with no children

47

11

58

39.9

Other one family

76

10

86

59.3

Multiple family

103

10

113

78.0

Lone person

20

3

23

15.9

Group

59

7

66

45.5

Average of all households

51

8

59

40.7

A couple with dependent children spent $80 a week on petrol and diesel, while a single parent family with dependent children spent $47. Couples without children spent almost the same as the all-household figure, and "other one family households" - such as those with non-dependent children, or comprising adult siblings - spent more.

For the couple with dependent children, using an average of 47.8 litres of petrol and 7.3 litres of diesel a week, the reintroduction of the excise will cost an extra 55.1 cents a week.

Indirect costs

According to the Parliamentary Budget Office, the excise on fuel represented 1 per cent of Gross Domestic Product in 2012-13, down from 1.7 per cent of GDP in 2001 when indexation was scrapped.

However economists say it's unlikely a small increase in fuel prices would lead to an increase in other costs. Automotive fuel makes up 3.66 per cent of the total CPI.

Commonwealth Bank economist Gareth Aird, who has studied the impact of oil prices on the economy, says a one cent lift in the excise is unlikely to "materially impact on the prices of food and transport costs".

Mr Aird says there would need to be "a larger increase in the petrol excise for flow-on effects to be felt through price rises in other goods and services".

That's a view shared by Shane Oliver, chief economist at AMP Capital. "It would have to have a virtually negligible impact on the price of end products that have to be transported like food," Dr Oliver said.

The verdict

Mr Abbott says the average family will pay an extra 40 cents per week in the first year as a result of fuel excise indexation.

His 40-cent claim applies to "the average household" including single occupiers rather than "the average family". For some families, such as a couple with dependent children, that figure can be 55 cents extra per week.

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